As consumers all across America seek to save on utility-provided energy for their homes, they have become the latest victims of consumer fraud by third party renewable contractor/installers.
Here is how the scam works:
Homeowners and small businesses are approached by non-utility third-party contractor/installers promising significant energy savings and offering complete installation of a roof-top solar system with the enticement of a 20-year lease with small or no upfront costs for installation or operation.
These savings estimates are based on inflated assumptions about future utility rates that are unsupported by any real or reliable analysis. The consumers do not own the system that is affixed to their homes and are merely purchasing the “electricity” that is generated from an entity other than their public utility.
Homeowners are not told that, in entering into the solar lease, the solar company will secure the contractual obligations of the customer by placing a lien or other encumbrance on the homeowner’s property. As a result, the contractor/installer or holder in due course of the lien has a security on the entire real property not just on the solar installation.
Like any scam to be effective, the come on must be too good to be true – energy savings, no upfront costs, teaser rates in the early years, etc. Left for the fine print is the fact that the customer’s initially low lease payments escalates year after year, and that he or she may end up paying more for electricity just a few years out if their electric utility doesn’t raise rates as assumed or if other charges are made to electric policy that upset the dubious economics of the lease.
And, like any scam, the perpetrators must act quick with high pressure sales tactics employed to sign up as many victims as possible before the flaws in the leasing model are made public and then sell the leases which are secured by liens to others at a deep discount, offering no remedy to the solar customer if the profiteer goes out of business or simply walk away.
The homeowner soon discovers their alleged energy cost savings are nowhere near that which was promised. If the homeowner refuses to pay on what is now an upside-down lease, they learn for the first time that the solar profiteer placed a lien on their home – a lien that impairs the customer’s ability to sell their home and that forces them to continue to pay under a bad contract at fear and risk of potential foreclosure or other legal action by the new holder of the lease.
This is frighteningly reminiscent of the mortgage-bundling scam earlier this decade.
Nothing will stop the unscrupulous contractor/installer from bundling leases and selling them to investors, funds and banks under the guise of legitimate investments.
It has been reported that consumers have made numerous complaints against one of the largest solar roof top installers whereby consumers are telling horror stories of high-pressure sales, long delays in installations far in excess of what was promised, and no energy savings. In many instances consumers were unaware that their homes would be subject to liens in their homes as a result of the lease.
Probably the only time a homeowner will come to realize there is a lien on their property is when there is a default or when they try to sell their homes. Many times liens cause long delays and great expense to clear up a lien prior to the closing of title. Add to this the fact that it would be very difficult to sell a home with an inoperable solar energy system affixed to a roof. The cost of removal of the system alone would be of great expense to homeowners.
Many consumers have complained that installations were found to have defective equipment, which limited their solar production and required households having to continue to purchase all of their electricity from the public utility electricity resulting in huge unforeseen bills for the homeowner.
In order to legitimize and advance the fraud, contractor/installers have sought out the assistance of local real estate brokers, architects and contractors, paying them a referral fee for every homeowner who signs up for a solar roof top installation.
Many roof top solar panel systems and associated metering equipment is complicated to understand thus making consumers easy marks for this type of fraud since they are ignorant of the necessary information needed to evaluate a home energy system and the economic and legal ramifications of the installation, savings, lease and lien aspects of “the deal.”
And, once the installation has been made the contractor/installer walks away leaving no one to handle customer service or monitor the equipment. There is a real concern that the solar equipment permanently affixed to consumer’s homes can be dangerous if not properly maintained. At best there could be leaks and at worst fire and loss of property and life.
Homeowners are also unaware that such installations may cause increases in homeowner’s insurance premiums — as the equipment must be insured in order to be covered. In many cases, even though the consumer does not own the solar panel equipment they may be charged and responsible for its maintenance.
Now is the time for State Attorneys’ General and the Federal Trade Commission to get ahead of a looming crisis. Government should be in the business of avoiding crisis and not merely responding to it. There should be immediate investigations, hearings and action taken to protect consumers from this rising consumer fraud.
We also need to insure that no government incentives are given to contractor/installers and homeowners that legitimize and further the fraud. We need to learn the lessons of Solyndra and Ener1 where the U.S. government wasted hundreds of millions of taxpayer dollars on corrupt and failed energy enterprises.
New consumer protections are needed to prevent energy fraud in light of the ever-increasing household renewable power businesses that have popped up as homeowners are looking to reduce their energy consumption and bills.
Presently there are no adequate consumer protections for fly by night energy companies masquerading as legitimate and regulated utilities.
We are on notice.
Bradley A. Blakeman served as deputy assistant to President George W. Bush from 2001-04. He is currently a professor of politics and public policy at Georgetown University and a frequent contributor to Fox News Opinion. Read more reports from Bradley Blakeman — Click Here Now.
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